Revisiting the Relationship between Economic Growth and Government Size | Zendy

Atrayee Ghosh Roy | Zendy

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Revisiting the Relationship between Economic Growth and Government Size

Author(s) -

Atrayee Ghosh Roy

Publication year - 2012

Publication title -

economics research international

Language(s) - English

Resource type - Journals

eISSN - 2090-2123

pISSN - 2090-2131

DOI - 10.1155/2012/383812

Subject(s) - economics , government (linguistics) , consumption (sociology) , investment (military) , crowds , private consumption , public finance , monetary economics , public economics , macroeconomics , fiscal policy , political science , social science , philosophy , linguistics , computer security , sociology , politics , computer science , law

The purpose of this paper is to explore the association between government size and economic growth in the United States using time-series data over the period 1950–2007. In particular, this paper examines the effects of two key components of government expenditure, namely, government consumption and government investment, on US economic growth. A simultaneous-equation model is used to deal with the problem of bi-directional relationship between government size and economic growth. The results suggest that an increase in government consumption slows economic growth, while a rise in government investment enhances economic growth. Furthermore, the results also show that government investment crowds out private investment. Therefore, the overall effect of total government expenditure on economic growth is ambiguous

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